China pilot programs readied

Positive news has emerged on the two pilot securitization schemes being developed by China Construction Bank and China Development Bank (see ASR 3/7/04)). At the end of March, after a consensus was reached among 10 separate regulatory bodies, the People's Bank of China - China's central bank - gave final approval to China Construction's mortgage-backed offering and China Development's CLO, which will be backed by infrastructure loans.

Standard Chartered is structuring the China Construction deal, while Lehman Brothers and Deloitte Touche Tomahatsu are acting on behalf of China Development. Each has approval to package loans worth Rmb10 billion ($1.21 billion), according to local media reports.

There has been some suggestion the China Construction issue could be launched before the end of April, although a source involved was understandably cautious. "We are in the process of refining the structure and preparing for investor presentations," the source said. "Obviously, we want to get the deal done ASAP but need to work within the confines of the government's agenda and pace."

With that in mind, completion before the end of June seems a more realistic target. If both deals go well, ABS bankers in the region will be eagerly sniffing out the seemingly endless opportunities for securitization in the People's Republic. Only last week, the central bank said the size of the mortgage market in the banking sector had topped Rmb1.65 trillion. However, with mortgages only accounting for 23% of all bank loans, so there is scope for issuance way beyond the MBS asset class.

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